HSP Revenue Management
Tashia's hotel sold 175 rooms last night at an ADR of $200.00. Her hotel has 250 rooms. What was Tashia's RevPAR last night? Occupancy x ADR = RevPAR
$140
Ray sold 100 rooms on Monday at an ADR of $150.00. He sold 150 rooms on Tuesday at an ADR of $200.00. What was his ADR for the combined days of Monday and Tuesday?
$180.00
In a hospitality industry break-even analysis graph the Total Revenues line starts at 0. Why does the Total Costs line always start farther up the y axis?
Because fixed costs are incurred even if no guests are served or rooms are sold
What is the industry term for the point at which an organization's revenues exactly equal its costs?
Break-even point
What is the fundamental assumption upon which the concept of consumer rationality is based?
Buyers act in ways that are of personal benefit to them
In a limited service hotel, what is the incremental expense incurred in selling one guest room?
CPOR
Rolling average
Calculated by using historical data during a changing time period
What is a displacement analysis? Why is this important to a hotel?
Compares the value of different pieces of business to identify the one that brings the most value to the hotel. Helps show profitability
What is the most likely result of a revenue manager's decision to reduce rack room rates during periods of reduced demand?
Competitor's rates will also be reduced
Sandy has 100 hotel rooms to sell. This Saturday night has enough customers to sell 125 rooms so she will be refusing 25 requests for rooms. What is this an example of?
Constrained supply
Why is knowledge required to price and manage goods/services?
Constrained supply
What is the economic term used to describe the difference between what a customer is charged for a product or service and the price that consumers would willingly pay for it?
Consumer surplus
Why is it important to understand the consumer beyond the traditional factors such as age, gender, etc?
Consumers have more freedom of choice than in the past, consumers refuse to be grouped, and purchased goods & services on the market
What is the specialized branch of accounting that focuses on recording and analyzing the expenses incurred by an organization?
Cost accounting
Fixed Costs
Cost associated with an occupied room regardless of the total number of rooms occupied. $ to pay phone operator
CPOR
Cost per occupied room
Historically, what concept have hospitality managers chiefly used to calculate their selling prices?
Costs
Variable Costs
Costs incurred when additional rooms are sold, changes and is dependent on rooms sold. Additional housekeeper
Donna is a hotel revenue manager. Donna knows that for tonight she has sold 175 of her 200 available rooms. As a result, is eliminating room discounts on her remaining 25 rooms. In doing so, what data type is she primarily using to make her decision?
Current Data
What is the term used to identify a management philosophy that places customer gain ahead of short-term revenue maximization in revenue management decision making?
Customer-centric revenue management
Occupancy Percentage
Demand / Supply
Unconstrained Demand
Demand in the absence of pricing and inventory constraints *helps to know future projections
4 types of forecasts
Demand, Revenue, Operational, and Strategic
What is the lodging industry term for the situation that occurs when a hotel is unable to accommodate a guest's reservation preference due to the unavailability of the room or service at the price, or on the date, originally requested by the guest?
Denied Reservation
What is the relationship between differential pricing and consumer surplus?
Differential pricing is a strategy used by sellers to minimize consumer surplus
Differential Pricing
Differing perceptions of value = different prices to different customers
Trailing period
Discarding the oldest piece of data when the newest data are added
Which of the following terms would be included in the Place portion of a hotel's marketing mix?
Distribution channels
Strategic Pricing Principles
Dynamics between pricing, supply, demand, cost and customer value
What is the most customer-centric strategy for revenue managers to employ if they seek to optimize ADR and RevPAR in periods of temporarily heightened demand?
Eliminate discounts
Economics as a discipline includes some basic principles except:
Emotionality
Revenue manager*
Ensures a company's prices match a customer's willingness to pay *customer driven
A variable cost is the cost associated with an occupied room regardless of the total number of rooms occupied.
False
As hoteliers identify ways to increase occupancy, the cost of the efforts plus the costs associated with additional rooms do not need to be weighed against the additional revenue that can be achieved by selling those rooms.
False
Demand indicators require taking a look at consumer behaviors, booking trends, competitive trends, pricing trends, segmentation trends, and distribution trends
False
Economics is something that tells you how to make money or to run a business or to predict the ups and downs of the stock market.
False
Even when customer segments are different, they bring similar values and have similar spending habits when traveling.
False
Forecasting is not one of the biggest challenges for many hoteliers.
False
Hoteliers do not need to have a solid understanding of each segment's typical spending habits and total spending as this will not help in target marketing and showcasing the total value a hotel has to offer to that target customer.
False
Hotels do not incur costs that require a certain level of staffing at the front office such as the front desk, phone operators and bell staff regardless of how many rooms are occupied on a given night.
False
Hotels that make the decision to fill their meeting space with local catering groups do not run the risk of having to turn away potential group catering business.
False
In the "Duration Uncertainty" section, the paragraph indicates that: many groups, particularly conventions, do not suffer from high room attrition on the last day or two of the event.
False
Managing function space revenue is not more difficult than dealing with transient guest rooms because of the interaction of function space with room sales and food & beverage demand.
False
Supply and demand can be understood without first assessing constrained and unconstrained demand.
False
The economic environment does not have a direct relationship with revenue management and hotel strategies.
False
The group pricing strategy should not understand the direct and indirect costs associated with rooms is an important part of pricing.
False
The understanding a hotel's ancillary revenues and the identification of additional ancillary revenues do not bring bring significant benefits to hotels.
False
Supply refers to how much (quantity) of a product or service is desired by buyers.
False, Demand
After a demand forecast can be created, you must identify reports that are available and that can provide the necessary information.
False, before
Demand forecast helps to use for operational necessities such as scheduling.
False, operational forecast
Revenue forecast helps to support strategic objectives such as understanding the impact of the unconstrained demand and its effect on occupied rooms.
False, strategic forecast
The first step for the revenue forecast is to determine how often it should be completed.
False, the final step
There is just one type of forecasts that should be put together for every hotel.
False, there are 4
What is the term used to describe a pricing system in which all customers are charged the same price at all times?
Fixed Pricing
Which of the following food service costs is a variable cost?
Food
Donna is a hotel revenue manager preparing next year's rooms forecast. Donna knows that in November of next year a new hotel is opening near her own. As a result, she is considering reducing her rooms forecast for that month. If she does so, what data type will she be primarily using to make her decision?
Future data
Four components of an effective forecast
Insight, Historical data, current date, and future data
What is the name for the value given up by a buyer and a seller in a business transaction?
Price
What is a rack rate?
Price of rooms when no discounts of any type are offered
4 P's
Price, product, promotion, place
Offering guests the opportunity to purchase a sandwich, fries and a soft drink at a price lower than that which would be charged for those same items purchased separately is an example of which type of differential pricing strategy?
Pricing based on bundling
The requirement that a buyer present a coupon at the time of purchase is an example of what type of differential pricing strategy?
Pricing based on customer characteristic
The use of a formal customer rewards program is an example of what type of differential pricing strategy
Pricing based on customer characteristic
Offering reduced room rates only to those room buyers willing to book their reservations via an internet website is an example of which type of differential pricing strategy?
Pricing based on distribution channel
The premium prices charged for dinner served at the restaurant on the second level of the Eifel Tower can be attributed to which type of differential pricing strategy?
Pricing based on location
Which differential pricing strategy would in most cases be illegal or unethical if implemented?
Pricing based on the ethnicity of the buyer
A business hotel's promotion targeting local area residence and designed to offer them significantly reduced room rates on Sunday nights is an example of which type of differential pricing strategy?
Pricing based on time
What is the name for the net value achieved by both parties in a business transaction?
Profit
Which one of the following terms is not one of the 4 Ps of the Marketing Mix?
Proposition
Revenue management is most applicable in which quadrant?
Quad 2: When the price is variable and the duration is predictable
Which statement about high volume buyers in the hospitality industry is true?
The per-unit cost of selling to them is less than the cost associated with low volume buyers
Revenue forecast helps to have a realistic picture of probable future occupied rooms and rates to use to compare to budget and identify variances.
True
Revenue management is what we do to optimize the revenue earned from a fixed, perishable resource.
True
Revenue per available square foot (RevPAS) is a measurement of the revenue that an event generates based on the square footage used compared to the square footage available.
True
The S.W.O.T. analysis must be developed according to what is important and unique to groups and their needs, which may be different than the needs identified in a S.W.O.T. analysis for transient business.
True
The economic environment has a direct relationship with revenue management and hotel strategies
True
The following is one of the items required to complete an operational forecast: Identify each of the departments that will rely on this forecast.
True
The goal of function space revenue management is to maximize the revenue contribution of each function space for each time period that is available.
True
The group pricing strategy should identify the hotel's need periods and areas of opportunity. This may include holidays, special events in the marketplace or low demand times.
True
Peggy is the revenue manager at a 1500 room hotel. For next Friday Peggy's PMS shows 300 check-outs, 900 stayovers, 250 transient arrivals and a 200-room group block that begins a three-day stay on that day. What is Peggy's current rooms available for sale for next Friday?
150
Scott is a revenue manager in a 600 room hotel. For tomorrow he forecasts that 10 rooms will be OOO and that there will be 80 stayovers with 300 arrivals. He also forecasts 30 no-shows, 10 early departures and 20 over-stays. What is Scott's forecast for the number of rooms occupied tomorrow?
360
Tashia's hotel sold 175 rooms last night at an ADR of $200.00. Her hotel has 250 rooms. What was Tashia's occupancy % last night? Occupancy = Rooms Sold / Rooms Available
70%
Which industry was the first to use Yield Management principles?
Airlines
What is value-based pricing?
A pricing system based upon a buyer's view of product or service value
In the lodging industry what factors would be overinflated to produce an unrealistically high RevPAR forecast?
ADR and/or Occupancy %
Demand Generator
An event that produced a significant increase in business
Demand Drain
An event that produces a significant decrease in business
If a Revenue Manager implements an organization's strategic pricing plan what personal characteristic of that Revenue Manager will be most important for ensuring the plan's success?
An understanding of an organization's customers
What are ancillary revenues? Why are they important for the hotel's overall strategy?
Any additional revenues generated from products and services other than the main products and services offered by a hotel. May become a main source of revenue
Hottickets.com is a web-based business that buys popular concert tickets in bulk. It buys the tickets at a low price because it qualifies for group ticket discounts offered by concert promoters. Hottickets.com then marks up and immediately resells the tickets it has purchased to interested individuals who visit the site. What is the name of the activity this site is engaging in?
Arbitrage
What is the formula used to calculate GOPPAR?
Gross operating profit / available rooms
Keys to revenue management culture
Having strong leadership at the top of the organization Having strong goal alignment
Elastic demand
High price sensitivity On a graph the line will be very angled
Law of Demand
Higher the price, the less it will be wanted by buyers
Customer acquisition
How much are you spending to gain 1 customer The means of gaining customers is starting to be driven by online means
Difference between GOPPAR and RevPAR
In RevPAR you are not considering the costs
Which statement about revenue management in the hospitality industry is true?
It is best understood by experienced hospitality managers
What is one consistent characteristic of desirable rooms revenue?
It leads to higher GOPPAR levels
Inelastic demand
Low price sensitivity On a graph the line will be straight or almost straight
What is the lodging industry term for a revenue management strategy that instructs reservationists to decline any room reservation request that does not equal or exceed the pre-determined minimum number of nights allowed?
MLOS
What is the industry term for a customer group which can be readily identified by one or more common characteristics?
Market segment
MLOS
Minimum length of stay Declines reservations not equal to the minimum # of nights allowed
Which of the following lodging costs is a fixed cost?
Mortgage payments
What is the formula revenue managers use to calculate the percentage change in sales which has occurred from the last accounting period to the present period?
N - O / O = % change in sales
What is the formula revenue managers use to calculate Net ADR Yield?
Net room rate / standard ADR = Net ADR Yield
Constraints on demand
Number of rooms, rate restrictions, length of stay
Current Data Reports
Occupancy and Availability Group Rooms Pace Report Ancillary Revenue Pace Report
OOO
Out of order?
What is the industry term used to describe the selling of rooms which are not actually available for sale?
Overbooking
What is the formula used to calculate an owner's ROI?
Owner's investment return / Owner's original investment
What is the name for the rooms-related report that would identify the number of group rooms currently on the books as well as the rate or speed at which group rooms are currently being sold?
Pace Report
Value =
Perceived benefits - price
Amanda is the revenue manager of a hotel. When she opened her e-mail last Friday she found a message from the Executive Director of the state dental association asking Amanda for a formal price quote on rooms and meeting space needed by the association for their annual conference. What would Amanda call this inquiry?
RFP
RFP
Request for Proposal
Historical data includes
Reservations booked per day, reservations denied per day, checkins/check outs Commonly tracked: No-shows, walk-ins, KPI's
All except one of the following pricing systems are marketing-based. Which one is not an example of marketing-based pricing?
Return on Investment (ROI) pricing
What is the industry term for the average revenue generated by each occupied guestroom during a defined period of time?
RevPAR
What is the most likely result of a revenue manager's decision to raise room rates during periods of very high demand?
RevPAR will be increased
What is: Total period revenue / (Number of available seats) x (hours of seat availability)
RevPASH formula
What is the formula used to calculate Average Daily Rate?
Revenue / # of rooms sold
ADR
Revenue / Demand
RevPAR
Revenue / Supply
Which statement about revenue management and revenue optimization is true?
Revenue management seeks to maximize income while revenue optimization seeks to maximize long-term profits
What must be true if a product producer is to continue creating and selling products?
Revenues must exceed costs
Accountant's Profit Formula
Sales = Cost + Profit
Total occupied
Stayovers + Reservations - No show - early departure + over-stays
The components of revenue management include the following except?
Strategies for marketing control
What is the term used to describe the potential customers to whom a business's marketing activities and messages are directed?
Target marketing
Strategic Pricing
The application of data to effectively match prices with perceptions of value
Revenue Management
The art and science of maximizing revenue under variable conditions
What is the fundamental assumption upon which the Law of Supply is based?
The higher the demand for a product the more of it will be produced by sellers
Law of Supply
The higher the demand for a product, the more it will be produced
Which course of action would be most beneficial to the profit generating ability of a revenue manager's business?
The majority of any consumer surplus is captured by the business
Profit
The net value achieved by a seller and a buyer in a business transaction
What is the most likely result of a revenue manager's decision to raise room rates during periods of moderate to low demand?
The number of potential buyers will decline
What do you lose in a fixed pricing strategy
The opportunity to maximize revenue because if demand is high, people are willing to pay more
Net ADR yield
The proportion of the ADR that is actually realized after subtracting fees associated with a distribution channel Net Room Rate (formula: standard ADR - Distribution channel costs) / Standard ADR = Net ADR Yield
What is true for franchised hotel operations in the United States?
Their prices are established by the hotel owners
The three essential conditions for revenue management to be applicable include the following except
There must be similar customers who are willing to pay similar prices for the same product
Price discrimination is when businesses charge different prices to different groups of consumers for what are more or less the same products or services.
True
What is the purpose of a price fence or barrier?
To identify who is and who is not eligible for a special pricing offer
What is the primary reason for forecasting future room demand?
To make pricing-related decisions
Why is it important to create accurate estimates of demand for products?
To maximize profits
Revenue
Total amount of sales achieved in a specified time period Number of units sold x Unit price
What is the industry term used to describe the sum of prices paid by a business's customers?
Total revenue
A displacement compares the value of different pieces of business to identify the one that brings the most value to the hotel.
True
A significant increase in demand for hotel rooms could balance the increased in rooms available, and a decrease in rooms sold might worsen the negative impact generated by oversupply.
True
Ancillary revenues can be defined as any additional revenues generated from products and services other than the main products and services offered by a hotel.
True
Ancillary revenues vary depending on the hotel and the type of services offered, but in general, ancillary revenues include revenues from movies, Internet access, business center, mini-bar, laundry, spa services and fitness center.
True
Before a demand forecast can be created, you must identify the current technology that is being used such as the CRS, PMS, SCS, and RMS. It is important to review each and understand what information is able to be retrieved and/or tracked;
True
Being able to identify and understand the expenses per occupied room provides hoteliers with an opportunity to not only control expenses but also to identify any trends that may be impacting business.
True
Customers who are price sensitive generally pays a lower price for the same type of room booked by another customer who books the room only one or two days prior to their stay.
True
Demand forecast helps to determine the anticipated demand for the hotel absent any constraints.
True
Duration control can be managed by refining the definition of duration, reducing arrival uncertainty, reducing duration uncertainty, and by reducing the amount of time between functions.
True
Forecasting can be such a challenge is that much of forecasting includes a certain amount of intuition or "gut" feeling that must be taken into consideration.
True
Function space managers face two pricing decisions: what price to charge and how to determine who pays which price.
True
Hotels have two types of catering business: the first is group catering which is defined as the catering business connected with a group that is utilizing overnight guest rooms. The second type is called local catering which is catering business that is not connected with any overnight guest rooms.
True
In order for hotels to be successful in the group arena they must ensure that they have the proper strategies and tools in place as well as a thorough understanding of the various needs of groups.
True
Inventory decisions can significantly impact a hotel's revenue maximization
True
One important point to understand about forecasting in general regardless of the tool in use is that it is important to ensure the forecast is put together by market segment.
True
Over the last several years, the industry has recognized that revenue management can no longer be a tactical approach to room and pricing management only.
True
The process of developing a group pricing strategy is not also similar to that of developing a transient pricing strategy. A strategic pricing strategy for groups allows hotels to be proactive and provides guidelines and plans that allow the entire hotel sales team to effectively sell their products.
True
There are several areas of opportunity for hoteliers to significantly increase front end ancillary revenues. Areas such as up-selling, cross-selling, late check out, no-show, early departure fees, late cancellation fees and ticket sales commissions are just some of the areas hoteliers tend to overlook.
True
Unconstrained demand for a hotel is determined by tracking the true demand for the hotel regardless of any space capacity limitations.
True
When supply is high but demand is low, prices come down.
True
Without an accurate forecast and the right types of forecasting, even the best revenue strategies cannot be realized.
True
Charging guests for watching a "Pay-Per-View" movie in their hotel guestroom is an example of what type of pricing?
Two-tiered pricing
What is the revenue management term used to describe the perceived benefit gained, minus the price paid, in a business transaction?
Value
What is created when a seller communicates to a buyer a description of a product to be sold and the price at which that product will be sold?
Value proposition
When might a revenue manager at a lodging facility be pressured to establish a long-term forecast that is unrealistically low?
When a significant financial incentive exists for exceeding the forecast
In the lodging industry, when is a guest considered to be an over-stay?
When the guest checks out of the hotel after his or her originally scheduled check-out date
Macroeconomics studies the economy as a whole and addressed questions such as except:
Where customers must spend their resources
